Accounting Disclosure of Digital Transformation Costs and Cyber Assets in Financial Statements: Its Impact on Cost of Capital and Investor Decisions

Abstract

This research investigates the impact of innovative accounting disclosure regarding digital transformation costs and cyber assets on the cost of capital and investor decisions in listed non-financial firms, addressing the structural shortcomings in traditional accounting standards (IFRS and US GAAP) the study adopts the Cyber Resilience and dynamic digital Asset valuation (CR-DDAV) Accounting Framework, introducing precise composite indices based on disclosure text analysis and Natural Language Processing (NLP)  the Digital and Cyber Compliance Disclosure Index (DCCDI) and the Digital Disclosure quality & heuristics Index (DQH), to verify the framework's efficiency and test its hypotheses, an advanced econometric simulation model was designed and executed in Python using panel data for a sample o f N = 250 firms over T = 5 years, yielding a total o f1,250 observations through a two way Fixed Effects Panel Regression model, the simulation results empirically prove that detailed and reliable disclosure of cyber assets substantially mitigates information asymmetry, registering a highly significant negative effect on reducing the cost of capital (beta = -0.0392, p < 0.0001) with an exceptional adjusted coefficient of determination (R^2 = 0.998). These findings confirm the proposed framework's capability to successfully bridge the research gap, providing conclusive mathematical and practical evidence that financial markets reward technological transparency by lowering risk premiums and enhancing the efficiency of investment allocation decisions.

Keywords: Accounting Disclosure, Digital Transformation, Cyber Assets, Cost of Capital, Information Asymmetry, Python Simulation, Fixed Effects Model.